Stater Bros 10-Q 2010 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ  quarterly report pursuant to section 13 or15(d) of the securitiesexchange act of 1934

For the quarterly period ended March 28, 2010

or

o  transition report pursuant to section13 or15(d) of the securitiesexchange act of 1934

For the transition from                    to                    

Commission file number001-13222

STATER BROS. HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0350671
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

301 S. Tippecanoe Avenue San Bernardino, California	92408
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (909) 733-5000

Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o.

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o.

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o  Non-accelerated filer þ
(Do not check if a smaller reporting company) Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ.

As of May 11, 2010, there were issued and outstanding
34,552 shares of the registrant’s Class A Common Stock.

STATER BROS. HOLDINGS INC.
March 28, 2010

INDEX

			Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 27, 2009 and March 28, 2010 (Unaudited)			3
	Consolidated Statements of Income (Unaudited) for the 13 weeks ended March 29, 2009 and March 28, 2010			5
	Consolidated Statements of Income (Unaudited) for the 26 weeks ended March 29, 2009 and March 28, 2010			6
	Consolidated Statements of Cash Flows (Unaudited) for the 26 weeks ended March 29, 2009 and March 28, 2010			7
	Notes to Consolidated Financial Statements (Unaudited)			8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3.	Quantitative and Qualitative Disclosure about Market Risk			23
Item 4.	Controls and Procedures			23
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings			24
Item 1A.	Risk Factors			24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			25
Item 3.	Defaults Upon Senior Securities			25
Item 4.	(Removed and Reserved)			25
		��
Item 5.	Other Information			25
Item 6.	Exhibits			25
SIGNATURES				26
EX-31.1
EX-31.2
EX-32.1

2

PART I — FINANCIAL INFORMATION

Item 1.FINANCIAL STATEMENTS

STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

ASSETS

	Sept. 27,		Mar. 28,
	2009		2010
			(Unaudited)
Current assets
Cash and cash equivalents	$	196,914	$	263,929
Restricted cash		3,121		3,121
Receivables, net of allowance of $759 and $738		36,671		37,817
Income tax refund receivable		4,049		5,468
Inventories		212,856		225,965
Prepaid expenses		9,330		10,914
Deferred income taxes		20,479		24,800
Assets held for sale		83,617		—
Note receivable, current portion		300		493
Long-term receivable, current portion		—		17,741
Total current assets		567,337		590,248
Property and equipment
Land		97,430		97,430
Buildings and improvements		544,440		554,864
Store fixtures and equipment		428,431		435,506
Property subject to capital leases		9,983		9,983
		1,080,284		1,097,783
Less accumulated depreciation and amortization		408,791		435,235
		671,493		662,548
Deferred income taxes, long-term		36,014		36,195
Deferred debt issuance cost, net		11,276		9,662
Note receivable, less current portion		493		—
Long-term receivable, less current portion		18,867		—
Other assets		9,255		8,869
		75,905		54,726
Total assets	$	1,314,735	$	1,307,522

See accompanying notes to unaudited consolidated financial statements.

3

STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS (contd.)
(In thousands, except share amounts)

LIABILITIES AND STOCKHOLDER’S EQUITY

	Sept. 27,			Mar. 28,
	2009			2010
				(Unaudited)
Current liabilities
Accounts payable	$	153,083		$	144,296
Accrued payroll and related expenses		53,313			57,691
Other accrued liabilities		79,618			78,358
Liabilities held for sale		5,634			—
Current portion of capital lease obligations		1,336			1,444
Total current liabilities		292,984			281,789
Long-term debt		810,000			810,000
Capital lease obligations, less current portion		3,768			3,018
Long-term portion of self-insurance and other reserves		36,227			38,883
Long-term deferred benefits		77,396			79,766
Other long-term liabilities		30,605			30,633
Total liabilities		1,250,980			1,244,089
Commitment and contingencies
Stockholder’s equity
Common Stock, $.01 par value:
Authorized shares — 100,000 Issued and outstanding shares — 0		—			—
Class A Common Stock, $.01 par value:
Authorized shares — 100,000 Issued and outstanding shares — 35,152 in 2009, 34,552 in 2010		—			—
Additional paid-in capital		8,939			8,786
Accumulated other comprehensive loss		(16,720	)		(16,720	)
Retained earnings		71,536			71,367
Total stockholder’s equity		63,755			63,433
Total liabilities and stockholder’s equity	$	1,314,735		$	1,307,522

See accompanying notes to unaudited consolidated financial statements.

4

STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share and share amounts)

	13 Weeks Ended
	Mar. 29,			Mar. 28,
	2009			2010
Sales	$	930,996		$	885,537
Cost of goods sold		675,170			649,092
Gross profit		255,826			236,445
Operating expenses
Selling, general and administrative expenses		206,312			198,018
Gain on sale of dairy assets		—			(1,446	)
Depreciation and amortization		13,552			12,788
Total operating expenses		219,864			209,360
Operating profit		35,962			27,085
Interest income		125			26
Interest expense		(17,348	)		(17,374	)
Other income (expenses), net		(43	)		16
Income before income taxes		18,696			9,753
Income taxes		7,575			3,786
Net income	$	11,121		$	5,967
Earnings per average common share outstanding	$	316.37		$	172.60
Average common shares outstanding		35,152			34,572
Shares outstanding at end of period		35,152			34,552

See accompanying notes to unaudited consolidated financial statements.

5

STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share and share amounts)

	26 Weeks Ended
	Mar. 29,			Mar. 28,
	2009			2010
Sales	$	1,890,249		$	1,809,401
Cost of goods sold		1,387,561			1,334,806
Gross profit		502,688			474,595
Operating expenses
Selling, general and administrative expenses		417,316			403,306
Gain on sale of dairy assets		—			(9,396	)
Depreciation and amortization		26,912			25,454
Total operating expenses		444,228			419,364
Operating profit		58,460			55,231
Interest income		330			85
Interest expense		(34,448	)		(34,563	)
Other income, net		106			5
Income before income taxes		24,448			20,758
Income taxes		9,786			8,080
Net income	$	14,662		$	12,678
Earnings per average common share outstanding	$	417.10		$	363.66
Average common shares outstanding		35,152			34,862
Shares outstanding at end of period		35,152			34,552

See accompanying notes to unaudited consolidated financial statements.

6

STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

	26 Weeks Ended
	March 29,			March 28,
	2009			2010
Operating activities:
Net income	$	14,662		$	12,678
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,521			31,163
Amortization of debt issuance costs		1,614			1,614
Increase in deferred income taxes		(454	)		(4,502	)
Gain on sale of dairy assets		—			(9,396	)
Gain on disposals of assets		(17	)		(3	)
Changes in operating assets and liabilities:
Decrease in restricted cash		2,500			—
Increase in receivables		(4,097	)		(1,146	)
Increase in income tax receivables		—			(1,419	)
(Increase) decrease in inventories		5,578			(13,109	)
Increase in prepaid expenses		(243	)		(1,584	)
Decrease in assets held for sale		160			215
Decrease in other assets		140			703
Decrease in accounts payable		(29,532	)		(8,787	)
Increase in income taxes payable		5,140			—
Increase (decrease) in liabilities held for sale		(3,616	)		1,014
Increase (decrease) in other accrued liabilities		(6,749	)		3,118
Increase in long-term reserves		10,425			5,054
Net cash provided by operating activities		31,032			15,613
Financing activities:
Principal payments on capital lease obligations		(553	)		(642	)
Stock redemption		—			(8,000	)
Dividend paid		—			(5,000	)
Net cash used in financing activities		(553	)		(13,642	)
Investing activities:
(Increase) decrease in note receivable		(793	)		300
Decrease in store construction reimbursement		7,952			—
Proceeds from sale of dairy assets, net of fees		—			85,833
Purchase of property and equipment		(31,047	)		(21,132	)
Proceeds from sale of property and equipment		203			43
Net cash provided by (used in) investing activities		(23,685	)		65,044
Net increase in cash and cash equivalents		6,794			67,015
Cash and cash equivalents at beginning of period		144,987			196,914
Cash and cash equivalents at end of period	$	151,781		$	263,929
Interest paid	$	32,884		$	32,784
Income taxes paid	$	5,100		$	14,000

See accompanying notes to unaudited consolidated financial statements.

7

STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 28, 2010

Note 1 — Basis of Presentation

     The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the twenty-six weeks ended March 28, 2010 are not necessarily indicative of the results that may be expected for the year ending September 26, 2010.

     The consolidated balance sheet at September 27, 2009 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

     For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s report on Form 10-K for the year ended September 27, 2009.

Note 2 — Principles of Consolidation

     The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Stater Bros. Markets (“Markets”) and Stater Bros. Development, Inc. (“Development”) and Markets’ wholly-owned subsidiaries, Super Rx, Inc. (“Super Rx”) and SBM Dairies, Inc. (“Dairies”). All significant inter-company transactions have been eliminated in consolidation.

Note 3 — Reclassifications

     Certain amounts in assets held for sale and deferred income taxes within the September 27, 2009 consolidated balance sheet and certain captions for operating activities within the March 29, 2009 statement of cash flows have been reclassified to conform to the current period’s financial statement presentation. Substantially all of the assets and certain liabilities of Dairies had been classified as “Held for Sale” prior to their disposal on October 11, 2009 as described in “Note 8 — Asset Sale” in these notes to the unaudited consolidated financial statements.

Note 4 — Subsequent Events

     The Company has evaluated subsequent events through the date of issuance of these consolidated financial statements and has determined that there were no material subsequent events that need to be disclosed other than the amendment to the credit facility as disclosed in “Note 10 — Credit Facility”.

Note 5 — Use of Estimates

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Note 6 — Income Taxes

     The Company establishes deferred tax liabilities for anticipated tax timing differences where payment of tax is anticipated. Such amounts represent a reasonable provision for taxes ultimately expected to be paid, and the amounts may be adjusted over time as additional information becomes known.

8

STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 28, 2010

Note 6 — Income Taxes (contd)

     The Company does not have any material tax positions that did not meet a “more-likely-than-not” recognition threshold. As such, the Company has not recorded any liabilities for uncertain tax positions. During the twenty-six weeks ended March 28, 2010, there have been no material changes to the amount of uncertain tax positions.

     The Company recognizes interest and penalties related to income tax deficiencies or assessments by taxing authorities for any underpayment of income taxes separately from income tax expenses as interest expense and other operating expenses, respectively.

     For federal tax purposes, the Company is subject to review of its fiscal 2006 through fiscal 2008 tax returns. For state tax purposes, the Company is subject to review of its fiscal 2006 through fiscal 2008 state tax returns. The Company is currently under audit for its fiscal 2006 and fiscal 2007 state tax returns by the State of California Franchise Tax Board (“FTB”).

Note 7 — Retirement Plans

     The Company has a noncontributory defined benefit pension plan covering substantially all non-union employees. The plan provides for benefits based on an employee’s compensation during the eligibility period while employed with the Company. The Company’s funding policy for this plan is to contribute annually at a rate that is intended to provide sufficient assets to meet future benefit payment requirements. Market value of plan assets is calculated using fair market values as provided by a third-party trustee. The plan’s investments include cash, which earns interest, governmental securities, and corporate bonds and securities, all of which have quoted market values.

The following table provides the components of net periodic pension expense:

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	Mar. 29,			Mar. 28,			Mar. 29,			Mar. 28,
	2009			2010			2009			2010
	(in thousands)						(in thousands)
Expected return on assets	$	(801	)	$	(878	)	$	(1,601	)	$	(1,755	)
Service cost		573			841			1,147			1,682
Interest cost		965			1,028			1,929			2,057
Amortization of prior service cost		—			—			(1	)		(1	)
Amortization of recognized losses		50			359			99			718
Net pension expense	$	787		$	1,350		$	1,573		$	2,701
Actuarial assumptions used to determine net pension expense were:
Discount rate		7.50	%		5.50	%		7.50	%		5.50	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%		3.00	%
Expected long-term rate of return on assets		6.50	%		6.50	%		6.50	%		6.50	%

     The Company made approximately $1.8 million of contributions to its noncontributory defined pension plan during the twenty-six weeks ended March 28, 2010 and the Company expects to contribute an additional $1.4 million during the remainder of fiscal 2010.

9

STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 28, 2010

Note 8 — Asset Sale

     On October 11, 2009, the Company sold substantially all of the assets of Dairies to subsidiaries of Dean Foods (“Dean Foods”) for $88.0 million in cash, subject to a working capital adjustment, and assumption of certain liabilities including substantially all of Dairies’ current liabilities, which included accounts payable. In the second quarter of fiscal 2010, the purchase price was adjusted upward by approximately $1.5 million due to an adjustment made for working capital. Dairies’ assets which were sold consisted primarily of accounts receivable, inventory and property and equipment. The Company incurred approximately $3.8 million in transaction and other fees related to the transaction and recognized a gain, net of tax, of approximately $5.6 million. The pre-tax gain from the sale of Dairies’ assets is included in “Gain on sale of dairy assets” within the unaudited consolidated statements of income. Dairies retained responsibility for all workers compensation claims through the date of the transaction. As of March 28, 2010, Dairies has accrued approximately $4.2 million in workers’ compensation liabilities.

     Also on October 11, 2009, the Company entered into a ten year Product Purchase Agreement (the “PPA”) with Dean Foods to purchase substantially all of its milk products sold in its supermarkets from Dean Foods. The purchase prices under the PPA are deemed to approximate market pricing.

     As of October 11, 2009, the Company ceased all dairy manufacturing operations. Markets and Super Rx have similar customers, regulatory requirements and delivery methods to customers and are included together as one reportable segment. Prior to the Dairy Transaction, Dairies was a separate reportable segment of the Company. As operating activities of Dairies have ceased and operating results from September 28, 2009 to October 11, 2009 are not material to the overall financial statements of the Company taken as a whole, the Company no longer has separate reportable segments to disclose.

Note 9 — Subsidiary Guarantee

     The Company has $525.0 million of 8.125% Senior Notes due June 15, 2012 and $285.0 million of 7.75% Senior Notes due April 15, 2015, collectively (the “Notes”).

     The Notes are guaranteed by the Company’s subsidiaries Markets and Development, and the Company’s indirect subsidiaries Super Rx, and Dairies (each a “subsidiary guarantor”, and collectively, the “subsidiary guarantors”). Condensed consolidating financial information with respect to the subsidiary guarantors is not provided because the Company has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and there are no subsidiaries of the Company other than the subsidiary guarantors.

10

STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 28, 2010

Note 10 — Credit Facility

     On May 4, 2010, the Company and Markets entered into the Third Amended and Restated Credit Agreement with Bank of America, N.A. (“Bank of America”), as sole and exclusive administrative agent and sole initial lender, consisting of a three-year unsecured revolving credit facility in a principal amount of up to $100 million (the “Credit Facility”), which replaced Markets’ previous credit facility.

     Markets is the borrower under the Credit Facility. The Credit Facility is guaranteed by the Company and all of its existing and future material subsidiaries, including Development and the Company’s indirect subsidiary Super Rx. Subject to certain restrictions, the entire amount of the Credit Facility may be used for loans, letters of credit, or a combination thereof. Borrowings under the Credit Facility are unsecured and may be used for working capital, certain capital expenditures and other general corporate purposes. Letters of credit issued under the letter of credit facility are expected to be used to support obligations incurred in connection with the construction of stores and workers’ compensation insurance obligations. The availability of the loans and letters of credit is subject to certain borrowing restrictions.

     Loans under the Credit Facility bear interest at a rate based upon either (i) the “Base Rate” (defined as the higher of (a) the federal funds rate plus 0.50% and (b) the rate of interest publicly announced by Bank of America as its “prime rate”), plus 1.00%, or (ii) the “Eurodollar Rate” (defined as the British Bankers Association LIBOR Rate for deposits in dollars, adjusted for the maximum reserve requirement for Eurocurrency funding), plus 1.75%. For Eurodollar Rate Loans, the Eurodollar Rate will apply for periods, as selected by Markets, of one, two, three or six months (but in any event not later than the maturity date of the Credit Facility).

     The Credit Facility requires Markets to meet certain financial tests, including minimum net worth and the maintenance of minimum earnings levels. The Credit Facility contains covenants which, among other things, limit the ability of Markets and its subsidiaries to (i) incur indebtedness, grant liens and guarantee obligations, (ii) enter into mergers, consolidations, liquidations and dissolutions, asset sales, investments, leases and transactions with affiliates, and (iii) make restricted payments. The Credit Facility also contains covenants that apply to the Company and its subsidiaries, and the Company is a party to the Credit Facility for purposes of these covenants. These covenants, among other things, limit the ability of the Company and its subsidiaries to incur indebtedness, make restricted payments, enter into transactions with affiliates, and make certain amendments to the Indentures governing the 8.125% Senior Notes and the 7.75% Senior Notes.

     The Credit Facility will mature on April 1, 2013.

     As of March 28, 2010, the Company had $49.8 million of outstanding letters of credit and it had $50.2 million available under the Credit Facility and Markets and the Company were in compliance with all restrictive covenants under the Credit Facility. However, there can be no assurance that Markets or the Company will be able to achieve the expected operating results or implement the capital expenditure strategy upon which future compliance with such covenants is based.

     The Company had no short-term borrowings outstanding as of March 28, 2010 and the Company did not incur any short-term borrowings during the twenty-six weeks ended March 28, 2010.

11

STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 28, 2010

Note 11 — Litigation Matters

     Various legal actions and claims are pending against the Company in the ordinary course of business. In the opinion of management and its general legal counsel, the ultimate resolution of such pending legal actions and claims will not have a material adverse effect on the Company’s consolidated financial position or its results of operations.

Note 12 — Dividend and Stock Redemption

     On November 17, 2009, the Company paid a $5.0 million dividend to La Cadena Investments (“La Cadena”), the sole shareholder of the Company.

     On December 28, 2009, the Company redeemed and retired 600 shares of its Class A Common Stock for $8.0 million. The redemption was for shares held by the Moseley Family Revocable Trust. La Cadena had distributed the shares to the Moseley Family Revocable Trust concurrently with the redemption and retirement of the shares.

     As of March 28, 2010, after taking into consideration the amendment to the Credit Facility on May 4, 2010, the Company has the ability and right under the Credit Facility and the Notes’ Indentures to make restricted payments, including dividends, of $34.3 million.

Note 13 — Long-Term Receivable

     During the second quarter of fiscal 2010, Markets entered into the Comprehensive Tri-Party Termination Infrastructure Reimbursement Agreement (the “Termination Agreement”) with the Inland Valley Development Agency (the “IVDA”) and Hillwood/San Bernardino, LLC (“Hillwood”) to terminate commitments with Hillwood under certain obligations and settle outstanding financial issues among the parties arising from several agreements previously entered into with Hillwood and the IVDA in connection with the development of the Company’s Norton distribution center. As part of the Termination Agreement, the amount previously due from the IVDA for tax increment reimbursement related to the construction of the Norton distribution center was negotiated downward from $18.9 million to $17.7 million with the $17.7 million to be paid to Markets no later than December 31, 2010. As such, the $17.7 million receivable has been classified as a current asset and the $1.2 million adjustment out of long-term receivable was recorded to “Building and improvements” in the Company’s March 28, 2010 consolidated balance sheet. Under the Termination Agreement, Markets paid approximately $0.7 million to Hillwood as reimbursement for shared improvement costs and any further financial commitments between Markets and Hillwood were terminated. The $0.7 million reimbursement was recorded to “Buildings and improvements” in the Company’s March 28, 2010 consolidated balance sheet.

12

STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 28, 2010

Note 14 — Fair Value of Financial Instruments

     The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

     Cash and Cash Equivalents

     The carrying amount approximates fair value because of the short-term maturity of these instruments.

     Receivables

     The carrying amount approximates fair value because of the short-term maturity of these instruments.

     Note Receivable

     Although a market quote for the fair value of the Company’s note receivable is not readily available, the Company believes the stated value approximates fair value.

     Long-Term Receivable

     Although market quotes for the fair value of the Company’s long-term receivable are not readily available, the Company believes the stated value approximates fair value.

     Long-Term Debt and Capital Lease Obligations

     The fair value of the 8.125% Senior Notes and the 7.75% Senior Notes, are based on quoted market prices. Although market quotes for the fair value of the Company’s capitalized lease obligations are not readily available, the Company believes the stated value approximates fair value.

     The estimated fair values of the Company’s financial instruments are as follows:

	As of
	March 28, 2010
	(In thousands)
	Carrying		Fair
	Amount		Value
Cash and cash equivalents	$	263,929	$	263,929
Receivables	$	43,285	$	43,285
Note receivable	$	493	$	493
Long-term receivable	$	17,741	$	17,741
Long-term debt	$	810,000	$	816,188
Capital lease obligations	$	4,462	$	4,462

13

STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART I — FINANCIAL INFORMATION (contd.)

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a consistent manner. Our critical accounting policies are summarized in our report on Form 10-K for the year ended September 27, 2009.

Our discussion and analysis of financial condition and results of operations are based upon our unaudited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles. The preparation of the financial statements requires the use of estimates and judgments on the part of management. We base our estimates on our historical experience combined with management’s understanding of current facts and circumstances.

SIGNIFICANT ACCOUNTING POLICIES

There are certain accounting policies that we have adopted that may differ from policies of other companies within our industry and other companies as a whole. Such differences in the treatment of these policies may be important to the readers of our report on Form 10-Q and our unaudited consolidated financial statements contained herein. For further information regarding our accounting policies, refer to the significant accounting policies included in the notes to the unaudited consolidated financial statements contained herein and in our report on Form 10-K for the year ended September 27, 2009.

14

STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OWNERSHIP OF THE COMPANY

La Cadena Investments (“La Cadena”), a California general partnership whose sole voting partner is the Jack H. Brown Revocable Trust, holds all of our issued and outstanding capital stock. Jack H. Brown, the Chairman of the Board, President and Chief Executive Office of the Company, is the Managing General Partner of La Cadena with the power to vote the shares of our capital stock held by La Cadena on all matters, including with respect to the election of our Board of Directors, and any other matters requiring shareholder approval.

AVAILABLE INFORMATION

We file quarterly and annual reports electronically with the Security and Exchange Commission (“SEC”) under forms 10-Q and 10-K and we file current reports on form 8-K and amendments to these reports. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. These electronic files can be found at the SEC’s website athttp://www.sec.gov. The public may read and copy any of our reports filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549. The public may obtain information on the Public Reference Room by calling the SEC at 1-800-SEC-0330.

EXECUTIVE OVERVIEW

We are the largest privately owned supermarket chain in Southern California. Our revenues are generated primarily from retail sales through our supermarkets. Our success is a result of our marketing strategy of offering everyday low prices while providing our customers with friendly and outstanding service on each of their visits to our stores which has been a seventy-four year Stater Bros.’ tradition.

On October 11, 2009, we sold substantially all of the assets of SBM Dairies, Inc (“Dairies”) to subsidiaries of Dean Foods (“Dean Foods”), (the “Dairy Transaction”), for $88.0 million in cash and assumption of certain liabilities including substantially all of Dairies current liabilities, which included accounts payable. In the second quarter of fiscal 2010, the purchase price was adjusted upwards by approximately $1.5 million due to an adjustment for working capital. Dairies’ assets which were sold consisted primarily of accounts receivable, inventory and property and equipment. Also on October 11, 2009, we entered into a ten year Product Purchase Agreement (the “PPA”) with Dean Foods to purchase substantially all fluid milk products sold in our supermarkets from Dean Foods. The purchase prices under the PPA are deemed to approximate market pricing. We incurred approximately $3.8 million in fees related to the Dairy Transaction and recognized a gain, net of tax, of approximately $5.6 million. We retained responsibility for all workers’ compensation claims of Dairies’ employees for events occurring through the transaction date. As of October 11, 2009, the Company ceased all dairy manufacturing operations.

As a result of the Dairy Transaction and the continued decline in the current economy, we anticipate that our sales will be lower than in fiscal 2009. Our strategy in the near term is to retain customer counts during these tough economic times by continuing to provide exceptional customer service and provide value to our customers on their purchases from our supermarkets.

Both our second quarter and our year-to-date fiscal 2010 consolidated gross profit margins, as a percentage of sales, were lower than the comparable periods of the previous year. Our marketing area of Southern California continues to be highly competitive and in flux. With the current economic conditions, our marketing area has seen job losses and business closures which will put further pressure on our gross margin as we endeavor to retain our customer base. We anticipate continued competitive pressures from “big box” format competitors including Walmart, Costco and Target, from our traditional grocery format competitors Vons, Albertsons and Ralphs and from independent supermarket operators.

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STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

	Thirteen Weeks Ended						Change
	Mar. 29,			Mar. 28,			2010 to 2009
($ in thousands)	2009			2010			Dollar			%
Sales	$	930,996		$	885,537		$	(45,459	)		(4.88	)%
Gross Profit	$	255,826		$	236,445		$	(19,381	)		(7.58	)%
as a % of sales		27.48	%		26.70	%

	Twenty-Six Weeks Ended						Change
	Mar. 29,			Mar. 28,			2010 to 2009
($ in thousands)	2009			2010			Dollar			%
Sales	$	1,890,249		$	1,809,401		$	(80,848	)		(4.28	)%
Gross Profit	$	502,688		$	474,595		$	(28,093	)		(5.59	)%
as a % of sales		26.59	%		26.23	%

Sales

Overall our sales were down $45.5 million and $80.8 million for the thirteen and twenty-six week periods of fiscal 2010, respectively. The Dairy Transaction accounted for a decline in sales of $24.5 million and $49.6 million in the thirteen and twenty-six weeks of fiscal 2010, respectively. Sales in our supermarkets for the thirteen and the twenty-six weeks ended March 28, 2010 compared to the comparable periods of fiscal 2009 were down 2.31% and 1.70%, respectively. Our like store sales have been adversely affected by the downturn in our local economy and by continued competitive pressures. We anticipate that our like store sales for the remainder of fiscal 2010 will be lower than like store sales in fiscal 2009 as we believe that for the foreseeable future unemployment in our marketing area will continue to be high and competitive pressures will continue.

Like Store Sales

We calculate like store sales by comparing year-to-year sales for stores that are opened in both years. For stores that were not opened for the entire previous year periods, we only include the current year’s weekly sales that correspond to the weeks the stores were opened in the previous year. For stores that have been closed, we only include the prior year’s weekly sales that correspond to the weeks the stores were opened in the current year. Replacement store sales are included in like store sales.

Like store sales are affected by various factors including, but not limited to, inflation, deflation, promotional discounting, customer traffic, buying trends, pricing pressures from competitors and competitive openings and closings.

Like store sales for the second quarter of fiscal 2010 compared to the second quarter of fiscal 2009 decreased $28.3 million or 3.12%. Our recently opened stores have had an impact on our existing store sales. We estimate that they drew approximately $2.3 million of their second quarter 2010 sales from our existing stores.

Since the beginning of the second quarter of fiscal 2009, we opened two stores, one of which was opened during a portion of the second quarter of fiscal 2009. As such, these corresponding sales in fiscal 2010 are not included in like store sales. These recently opened stores had second quarter fiscal 2010 sales of $9.3 million of which $7.3 million is not included in like store sales.

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STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (contd.)

Like Store Sales(contd.)

For the twenty-six week period of fiscal 2010, like store sales decreased $48.6 million or 2.65% from the twenty-six week period of fiscal 2009. Our recently opened stores have had an impact on our existing store sales For the twenty-six weeks of fiscal 2010, we estimate that they drew approximately $6.0 million of their sales from our existing stores.

During fiscal 2009, we opened three stores, two of which were opened during a portion of the twenty-six weeks of fiscal 2009 and the third store was opened later in fiscal 2009. As such, these corresponding sales in fiscal 2010 are not included in like store sales. For the twenty-six weeks of fiscal 2010, these recently opened stores had sales of $28.1 million of which $18.5 million are not included in like store sales. We closed one store in the first quarter of fiscal 2009, which reduced the twenty-six week fiscal 2010 sales by approximately $1.2 million.

Gross Profit

Our gross profit margin in the second quarter of fiscal 2010, as a percentage of sales, was 26.70% a decline of 78 basis points when compared to the second quarter fiscal 2009 gross margin of 27.48%. The decline in our gross margin percentage in the second quarter of fiscal 2010 also caused our twenty-six week gross margin to decline 36 basis points compared to the same period of fiscal 2009. During March of 2009 and continuing through a portion of the third quarter of fiscal 2009, we were able to raise gross margin percentages as competitive pressures eased for a short period of time. At the end of the third quarter of fiscal 2009 and continuing into the twenty-six weeks of fiscal 2010, competitive pressures again intensified. We have taken actions, including the reduction in gross margins, in order to hold onto market share during these tough economic times. With the depressed economic conditions in the nation and in our marketing area, we and our competitors continue to take steps to retain market share, we anticipate our gross margins to be challenged in the foreseeable future.

Operating Expenses and Operating Profit

	Thirteen Weeks Ended						Change
	Mar. 29,			Mar. 28,			2010 to 2009
($ in thousands)	2009			2010			Dollar			%
Operating Expenses:
Selling, general and administrative expenses	$	206,312		$	198,018		$	(8,294	)		(4.02	)%
as a % of sales		22.16	%		22.36	%
Gain on sale of assets		—		$	(1,446	)	$	(1,446	)		—
as a % of sales		—			(0.16	)%
Depreciation and amortization	$	13,552		$	12,788		$	(764	)		(5.64	)%
as a % of sales		1.46	%		1.44	%
Operating profit	$	35,962		$	27,085		$	(8,877	)		(24.68	)%
as a % of sales		3.86	%		3.06	%

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STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (contd.)

Operating Expenses and Operating Profit (contd.)

	Twenty-Six Weeks Ended						Change
	Mar. 29,			Mar. 28,			2010 to 2009
($ in thousands)	2009			2010			Dollar			%
Operating Expenses:
Selling, general and administrative expenses	$	417,316		$	403,306		$	(14,010	)		(3.36	)%
as a % of sales		22.08	%		22.29	%
Gain on sale of assets	$	—		$	(9,396	)	$	(9,396	)		—
as a % of sales		—			(0.52	)%
Depreciation and amortization	$	26,912		$	25,454		$	(1,458	)		(5.42	)%
as a % of sales		1.42	%		1.41	%
Operating profit	$	58,460		$	55,231		$	(3,229	)		(5.52	)%
as a % of sales		3.09	%		3.05	%

Selling, General and Administrative Expenses

The increase in selling, general and administrative expenses, as a percentage of sales, in the thirteen week and twenty-six week periods of fiscal 2010 versus the same periods of fiscal 2009 is attributed primarily to an increase in the second quarter of fiscal 2010 of approximately $2.0 million in union insurance under our UFCW contracts. The remaining increase in selling, general and administrative expense, as a percentage of sales, in the second quarter of fiscal 2010 over fiscal 2009 is attributed to cost being compared to lower consolidated sales volumes in the current year versus the prior year.

The amount of salaries, wages and administrative costs associated with the purchase of our products included in selling, general and administrative expenses for the second quarters of fiscal 2010 and fiscal 2009 is $340,000 and $308,000, respectively, and $654,000 and $594,000 for the twenty-six weeks ended March 28, 2010 and March 29, 2009, respectively.

Gain on Sale of Dairy Assets

The pre-tax gain on sale of dairy assets in the thirteen week and twenty-six week periods of fiscal 2010 was approximately $1.4 million and $9.4 million, respectively. The Dairy transaction is described in “Note 8 — Assets Sale” to our unaudited consolidated financial statements contained herein.

Depreciation and Amortization

The decrease in depreciation and amortization expense in the second quarter and twenty-six weeks of fiscal 2010 compared to the same periods in fiscal 2009 is due primarily to reduced fixed asset additions in the current year and to the Dairy Transaction. Included in cost of goods sold is depreciation and amortization expense related to warehousing and distribution activities in both fiscal 2010 and fiscal 2009 and also related to dairy production in fiscal 2009 of $2.8 million and $4.3 million in the second quarters of fiscal 2010 and 2009, respectively, and $5.7 million and $8.6 million for the twenty-six weeks of fiscal 2010 and 2009, respectively. The decrease in depreciation and amortization expense included in cost of goods sold is attributed to the Dairy Transaction.

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STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS (contd.)

Interest Income

Interest income was $26,000 and $125,000 for the second quarters of fiscal 2010 and 2009, respectively, and $85,000 and $330,000 for the twenty-six week periods of fiscal 2010 and 2009, respectively. Interest income has decreased due to lower market rates. We expect our interest income to continue to be lower in the current fiscal year as market rates continue to be depressed.

Interest Expense

Prior to the effect of capitalized interest, interest expense was $17.4 million for both the second quarter of fiscal 2010 and 2009, and $34.6 million and $34.7 million for the twenty-six week periods for fiscal 2010 and 2009, respectively. We did not capitalize any interest in the second quarter of fiscal 2010 and we capitalized $109,000 of interest in the second quarter of fiscal 2009. Our capitalized interest was $16,000 and $259,000 for the twenty-six week periods of fiscal 2010 and 2009, respectively. The decrease in the amount of capitalized interest in both the second quarter and year-to-date periods is due to our completion of the construction of our Norton distribution center and to no new store construction in the twenty-six weeks of fiscal 2010.

Income Before Income Taxes

Income before income taxes amounted to $9.8 million and $18.7 million for the second quarters of fiscal 2010 and fiscal 2009, respectively, and was $20.8 million and $24.4 million for the twenty-six week periods of fiscal 2010 and fiscal 2009, respectively.

Income Taxes

Income taxes amounted to $3.8 million and $7.6 million in the second quarters of fiscal 2010 and fiscal 2009, respectively, and $8.1 million and $9.8 million in the twenty-six week periods of fiscal 2010 and 2009, respectively. Our effective tax rate was 38.8% and 40.5% for the second quarters of fiscal 2010 and 2009, respectively, and 38.9% and 40.0% for the twenty-six week periods of fiscal 2010 and 2009, respectively. The lower effective tax rate in fiscal 2010 versus fiscal 2009 for both the thirteen and twenty-six week periods is due primarily to our tax credits being applied against lower taxable income in fiscal 2010.

Net Income

Net income amounted to $6.0 million and $11.1 million in the second quarter of fiscal 2010 and fiscal 2009, respectively. Net income for the twenty-six weeks ended March 28, 2010 amounted to $12.7 million compared to $14.7 million for the twenty-six weeks ended March 29, 2009.

LIQUIDITY AND CAPITAL RESOURCES

We historically fund our daily cash flow requirements through funds provided by operations. We have the ability to borrow under our short-term revolving credit facility. Our credit agreement, as amended and restated on May 4, 2010, expires in April 2013 and consists of a revolving loan facility for working capital and letters of credit of $100.0 million. The letter of credit facility is maintained pursuant to our workers’ compensation and general liability self-insurance requirements.

As of March 28, 2010, we had $49.8 million of outstanding letters of credit and we had $50.2 million available under our credit facility.

We had no short-term borrowings outstanding as of March 28, 2010 and we did not incur any short-term borrowings during the twenty-six weeks of fiscal 2010.

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STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES (contd.)

The following table sets forth our contractual cash obligations and commercial commitments as of March 28, 2010.

	Contractual Cash Obligations
	(in thousands)
			Less than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years
8.125% Senior Notes due June 2012
Principal	$	525,000	$	—	$	525,000	$	—	$	—
Interest		106,640		42,656		63,984		—		—
		631,640		42,656		588,984		—		—
7.75% Senior Note due April 2015
Principal	$	285,000	$	—	$	—	$	—	$	285,000
Interest		121,482		22,088		44,175		44,175		11,044
		406,482		22,088		44,175		44,175		296,044
Capital lease obligations(1)
Principal	$	4,462	$	1,444	$	2,299	$	719	$	—
Interest		1,343		651		623		69		—
		5,805		2,095		2,922		788		—
Operating leases(1)		352,416		36,966		64,973		49,953		200,524
Total contractual cash obligations	$	1,396,343	$	103,805	$	701,054	$	94,916	$	496,568
	Other Commercial Commitments
	(in thousands)
			Less than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years
Standby letters of credit(2)	$	49,762	$	49,762	$	—	$	—	$	—
	��
Total other commercial commitments	$	49,762	$	49,762	$	—	$	—	$	—

(1)

We lease the majority of our retail stores. We have subleased our old office and distribution warehouses located in Colton, California under an initial 15 year term for an amount equal to our lease payments. For purposes of contractual cash obligations shown here, minimum lease payments on this lease are shown without sub-lease offset. Certain of our operating leases provide for minimum annual payments that change over the primary term of the lease. For purposes of contractual cash obligations shown here, contractual step increases or decreases are shown in the period they are due. Certain leases provide for additional rents based on sales. Primary lease terms range from 3 to 55 years and substantially all leases provide for renewal options.

(2)

Standby letters of credit are committed as security for workers’ compensation obligations. Outstanding letters of credit expire between September 2010 and February 2011.

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STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES (contd.)

Working capital amounted to $308.5 million at March 28, 2010 and $274.4 million at September 27, 2009, and our current ratios were 2.09:1 and 1.94:1, respectively. Fluctuations in working capital and current ratios are not unusual in our industry.

Net cash provided by operating activities for the twenty-six week periods ended March 28, 2010 and March 29, 2009 was $15.6 million and $31.0 million, respectfully. Significant sources of cash provided by operating activities was non-cash depreciation and amortization offset by an increase in inventory levels and a decrease in accounts payable.

The Dairy Transaction generated approximately $85.8 million in cash. Other significant uses of cash in the twenty-six week period ended March 28, 2010 included a capital stock redemption of $8.0 million and a dividend payment of $5.0 million.

As of March 28, 2010, after taking into consideration the amendment to our Credit Facility on May 4, 2010, we have the ability and right to pay restricted payments, including dividends, of up to $34.3 million.

We believe that operating cash flows and current cash reserves will be sufficient to meet our currently identified operating needs and scheduled capital expenditures. However, we may elect to fund some capital expenditures through capital leases, operating leases or debt financing. There can be no assurance that such debt and lease financing will be available to us in the future.

Labor Relations

Our collective bargaining agreements with the UFCW were renewed in March 2007 and extend through March 2011. Our collective bargaining agreement with the International Brotherhood of Teamsters was renewed in September 2005 and expires in September 2010. We believe we have good relations with our employees.

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STATER BROS. HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT FOR PURPOSES OF “SAFE HARBOR PROVISIONS” OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information contained in our filings with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by us) includes statements that are forward-looking, such as statements relating to plans for future activities. Such forward-looking information involves important risks and uncertainties that could significantly affect results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of Holdings. These risks and uncertainties include, but are not limited to, those relating to domestic economic conditions, seasonal and weather fluctuations, labor unrest, expansion and other activities of competitors, changes in federal or state laws and the administration of such laws and the general condition of the economy.

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STATER BROS. HOLDINGS INC.
MARCH 28, 2010

PART I — FINANCIAL INFORMATION (contd.)

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are subject to interest rate risk on our fixed interest rate debt obligations. Our fixed rate debt obligations are comprised of the 8.125% Senior Notes due June 2012, the 7.75% Senior Notes due April 2015 and capital lease obligations. In general, the fair value of fixed rate debt will increase as the market rate of interest decreases and will decrease as the market rate of interest increases. We have not engaged in any interest rate swap agreements, derivative financial instruments or other type of financial transactions to manage interest rate risk.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 28, 2010. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 28, 2010. There were no material changes in our internal control over financial reporting during the thirteen and twenty-six week periods ended March 28, 2010.

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STATER BROS. HOLDINGS INC.
MARCH 28, 2010

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Various legal actions and claims are pending against us in the ordinary course of business. In the opinion of management and its general legal counsel, the ultimate resolution of such pending legal actions and claims will not have a material adverse effect on our consolidated financial position or our results of operations.

For a description of legal proceedings, please refer to the footnote entitled “Litigation Matters” contained in the Notes to Consolidated Financial Statements section of our Form 10-K for the fiscal year ended September 27, 2009.

Item 1A. RISK FACTORS

Our performance is affected by inflation and deflation. In recent years, we have experienced both increases and decreases in transportation costs and the cost of the products we sell in our stores. The changes in our costs are attributed to changes in fuel, plastic, grains and other commodity costs. During times of inflation, we have recovered, to the extent permitted by competition, the increase in expenses by increasing prices over time. However, the economic and competitive environment in Southern California continues to challenge us to become more cost efficient as our ability to recover increases in expenses through price increases is diminished. Our future results of operations will depend upon our ability to adapt to the current economic environment as well as the current competitive conditions.

The supermarket industry is a highly competitive industry, which is characterized by low profit margins. Competitive factors typically include the price, quality and variety of products, customer service, and store location and condition. We believe that our competitive strengths include our service departments, everyday low prices, breadth of product selection, high product quality, one-stop shopping convenience, attention to customer service, convenient store locations, a long history of community involvement and established long-term customer base in Southern California.

Given the wide assortment of products we offer, we compete with various types of retailers, including local, regional and national supermarket retailers, convenience stores, retail drug stores, national general merchandisers and discount retailers, membership clubs and warehouse stores. Our traditional grocery format competitors include Vons, Albertsons and Ralphs. We also face competitive pressures from existing and new “big box” format retailers including Walmart, Costco and Target and from a number of independent supermarket operators. We expect our competitors to continue to apply pricing and other competitive pressures as they expand the number of their stores in our market area and as they continue to take steps to both maintain and grow their customer counts. We believe our everyday low prices, breadth of product offering, which includes approximately 40,000 items offered for sale in our stores, service departments and long-term customer relationships will assist and complement our ability to compete in this increased competitive environment. We monitor competitive activity and regularly review our marketing and business strategies and periodically adjust them to adapt to changes in our trading area.

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STATER BROS. HOLDINGS INC.
MARCH 28, 2010

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     None

Item 3. DEFAULTS UPON SENIOR SECURITIES

     None

Item 4. (REMOVED AND RESERVED)

Item 5. OTHER INFORMATION

     None

Item 6. EXHIBITS

(a)	Exhibits
31.1	Certification of Principal Executive Officer pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
10.17	Third Amended and Restated Credit Agreement, dated as of May 4, 2010, by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A., previously filed as an exhibit to the Current Report on Form 8-K dated May 10, 2010.

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STATER BROS. HOLDINGS INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 11, 2010	/s/ Jack H. Brown
	Jack H. Brown
	Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer)
Date: May 11, 2010	/s/ Phillip J. Smith
	Phillip J. Smith
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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